AI power – from MHD magazine

In today’s connected economy, organisations are increasingly reliant on collaborative business with existing and new trading partners (customers, suppliers and regulators). The latest innovations in artificial intelligence (AI) are equally contributing to the rapid augmentation of business models. The use of AI is becoming pervasive in how products and services are designed, built and delivered – ushering in a new wave of economic growth. In fact, more than half of outperforming supply chain executives surveyed said their top investments in the next three years will be cognitive or cloud. 86 per cent said cognitive computing will transform their demand planning and forecasting capabilities (Institute of Business Value, 2017).

“Every business is impacted by two types of activities in varying degrees – there are no exceptions.”

Business friction impedes collaborative performance

Any hindrance or business friction in collaborative-styled trading partner interactions and internal processes contributes to significant loss of national productivity, increased operational costs and lowered working capital. Friction is costing Australian businesses $29 billion a year (CMO from IDG, 2018). The economic impact can be expected to grow in the Australian economy as supply chains have lengthened for all sectors over the last 50 years. This is largely-driven by production being fragmented across more countries (Rachel Adeney, 2018). If organisations are to meet increasing demands to become more efficient and competitive, they must tackle the friction and fragmentation challenge.

Compliance can also increase business friction

The annual regulatory compliance cost imposed on the Australian community is estimated around $65 billion with about 72 per cent being attributed to tax, financial system, corporations, competition and consumer laws and regulations (The Mandarin, 2018). Most compliance regimes (regulatory and corporate governance, risk and compliance based) are introduced with an intent to increase performance in some form, shape or the other. However, in many instances they tend to increase business friction.

Friction impacts every business to varying degrees

Every business is impacted by two types of activities in varying degrees – there are no exceptions. The first being procurement-related activities, with the most common amongst all businesses being accounts payable and accounts receivable (sending and receiving invoices, payments and remittance advices). The second type of activity is compliance and the degree of impact depends on the type of business – tax (company, payroll and indirect) and superannuation affects every business. It is also important to emphasise that compliance activities are sometimes inseparable from other activities, for example, GST compliance is embedded in procurement related activities.

“The use of supply chain capabilities and fit-for-purpose AI can reduce friction and raise performance.”

Supply chain capabilities have evolved over time to reduce friction and raise performance

Supply chain capabilities have evolved in leaps and bounds over the last decade to create efficient ecosystems of organisations, people, activities, information and resources.

A supply chain philosophy can be applied to digitally transform typical or common areas of friction:

Leveraging the full power of AI for visibility, insights and optimisation

Watson Supply Chain Insights includes advanced AI capabilities specifically designed to give supply chain professionals greater visibility and insights. Companies can create situational awareness by combining and correlating the vast swathes of data they possess and see the impact of external events such as weather and traffic.

Using the operations centre, supply chain professionals can drill down in any given event to understand what orders are impacted and the potential financial implications. Watson can correlate all relevant information about a supplier or customer to quickly get a 360 view for impact analysis. It can help supply chain practitioners plan for mitigations based on a complete view of a supplier or customer. In turn, this allows supply chain professionals to look beyond their own operations and align with business and customer needs.

An example of harnessing AI

Lenovo took part in the Watson Supply Chain Fast Start program, enabling it to complete its first analyses with IBM Supply Chain Insights in just five weeks (IBM, 2018). In this short and focused exercise, the IBM team helped Lenovo complete three AI-driven use-case analyses using supply chain data from its production system. Lenovo is using IBM Watson Supply Chain Insights to rapidly predict, assess and mitigate the risk of disruptions to its supply chain. The average response time to supply chain disruptions shrinks from days to minutes — up to 90 per cent faster than before.

Lenovo’s supply chain professionals are now gaining the visibility to drive faster, better-informed decisions. If a key link in the supply chain is disrupted, they can drill down to identify which of its orders are affected, determine the potential financial implications, and act to mitigate the impact.

To support this new way of working, Lenovo is embracing a collaborative approach to decision-making. Today, supply chain managers from across the business meet in ‘resolution rooms’ — digital spaces that bring key stakeholders together quickly for even shorter response times.

Supply chain capabilities can create a digital fabric to power the economy

Organisations are constantly challenged to move resources, assets, inventory and personnel much more effectively to ensure they exceed client expectations. From better insights to driving down operational costs, AI can help organisations build more agile, intelligent and customer-centric supply chains.

The use of supply chain capabilities and fit-for-purpose AI can reduce friction and raise performance. In many cases compliance rules can also be seamlessly embedded into everyday collaborative business activity as a convenience or operational efficiency as opposed to compliance burden. This approach raises performance by a factor of two and used within the enterprise and across a trading community will create a new ‘digital fabric’.